Clarence IDA's tax breaks for dealership don't add up

Thanks to the Clarence Industrial Development Agency, Christmas came early for Towne Mini owners Franklin and David Downing.

Taxpayers across Erie County now are footing the bill for about $69,000 in sales and mortgage tax breaks that the Clarence IDA awarded the auto dealer for a project that will create no new wealth in the Buffalo Niagara region and just two new jobs.

With its vote on Thursday, the Clarence IDA effectively thumbed its nose at the whole IDA reform effort, defiantly backing tax breaks for a project that will live on as the latest poster child for what ails the suburban IDAs in the Buffalo Niagara region.

“It just doesn't make any sense,” said Assemblyman Sean Ryan, D-Buffalo, who has been pushing a plan in Albany to rein in the suburban IDAs in Erie County.

“These IDAs are going their own way and they're pursuing the economic development ideas of the past,” he said. “It just guarantees higher taxes for all.”

What's so bad about the Towne Mini project? Let me count the ways.

• For starters, it's a retail project. Wine stores, car dealers, doughnut shops, pizza places and dollar stores all serve local customers. They don't bring new money or business into Erie County. Should we be giving tax breaks to clothing stores? Video game stores? I don't think so.

• It's not economic development. It's just re-slicing the pie, with the IDA giving Towne Mini a competitive advantage over all of the other competing dealers who weren't lucky — and smart — enough to take advantage of the loophole that opened the door to tax breaks for retail projects almost five years ago.

Erie County is shrinking, and that only makes the notion of giving tax breaks to retail projects all the more ridiculous. With fewer buyers living here, every store has to compete harder just to maintain the same level of business. Any new sales they get don't come from new people moving into the area, they come from snatching new customers from the competition.

Towne Mini, in the documentation it filed with the Clarence IDA, said only about one of every 10 Minis that it sells goes to a buyer from outside Erie County. Overwhelmingly, its business is local. And that means that just about every Mini that Towne sells comes at the expense of every other Chevrolet, Ford, Chrysler, Honda, Toyota and Nissan dealer in the region.

It's robbing Peter to pay Paul.

David C. Hartzell Jr., the IDA's chairman and the Clarence supervisor, said he had been on the fence about the incentives but backed them because Towne was the only Mini dealer in the region. But even Hartzell said the IDA system needs fixing.

“The IDA structure as it exists today is in need of massive reform,” he said. “The only question is how.”

Hartzell would like to see IDAs put more of a focus on funding startups, which often struggle to find the funding they need.

“All of our current IDA options revolve around providing tax breaks for existing businesses. The way we score our success — by tracking jobs created — favors the companies that are currently in business, but not the ones who we would like — or we need — to grow and succeed,” he said. “So the companies that have the most money and can create the most jobs — but need the funding the least — get the most help? The current system is upside down.”

Hartzell would like to see each Erie County IDA contribute $250,000 for a fund to help finance startups and other fledgling firms.

• There's nothing wrong with competition, but IDAs shouldn't be picking which retailers are winners and which ones are losers.

Ryan thinks Towne Mini would have gone ahead with the project even without IDA tax breaks. “They are expanding. They bought the property. They have demolished houses on the property,” he said. “Their franchise agreement requires [the expansion].”

Towne officials have indicated that they were counting on the tax breaks, but if $69,000 in tax breaks can make or break a $1.9 million project, it's on mighty shaky ground.

To be sure, the tax breaks that Towne Mini is getting are pretty modest. But the tax breaks add up as retail projects multiply.

“It's a slow drip, and often they'll say it's only $80,000,” Ryan said. “But it's like letting your faucet drip. It doesn't seem like much, but wait until you get your water bill.”

• While this is a Clarence project, the revenue hit that Clarence schools and its town government will feel is minimal because the tax breaks are spread across the county. That's not fair to taxpayers in Cheektowaga and more than a dozen other Erie County municipalities, which doen't have their own IDA and can't offer tax breaks for retail projects in their communities.

That's because those communities work through the Erie County IDA, which takes a much harder line on retail projects than its suburban counterparts. Towne Mini wouldn't be getting any tax breaks if it was looking to build a new dealership in West Seneca or East Aurora.